How Disruptive Technology is turning Domestic Energy Production into America’s Growth Engine

As Congress and the President spar over the political advantage or blame from our current debt crisis, disruptive technology is revving America’s potential for domestic energy production and turning it into a “game changer” in our claw back to economic growth. This transformation is not happening in Washington, DC, it is happening deep in the heart of America where politicians rarely visit.

It is not dependent upon Federal stimulus money, tax lobbyists, or other gimmicks. This growth of domestic energy productive capacity is turning the energy business on its head and is fueling new hope and new jobs for America’s economic recovery.

We need the government to stay out of the way.

This game changer was not suddenly discovered yesterday. The application of horizontal drilling and hydraulic fracturing techniques developed back in the 1980’s at Mitchell Energy and Development Corporation in an effort to economically extract shale gas in the Barnett Shale play in North Central Texas. That Texas ‘we can do this’ ingenuity soon was the longneck discussion of choice across the oil and gas business. Others adopted the techniques and perfected them as oil services firms applied their skill and equipment. By 2005, Barnett Shale production had grown to 0.5 trillion cubic feet (tcf) of natural gas per year. The latest assessment of the productive potential of the Barnett shale gas play, including both active and undeveloped areas, is about 43.37 tcf of technically recoverable gas.

US EIA Annual Energy Outlook 2011

From this first Mitchell Energy venture nearly 30 years ago, this use of disruptive technology has spread as producers gained confidence in the ability to produce oil and natural gas profitably from unconventional resources. The result has increased unconventional gas production in the United States from 1.0 trillion cubic feet in 2006 to 4.8 trillion cubic feet, or 23 percent of total U.S. 2010 dry natural gas production. Wet shale gas reserves grew to about 60.64 trillion cubic feet by year-end 2009 or about 21 percent of overall U.S. natural gas reserves, the highest level since 1971.

Even better news was the same production techniques also worked to expand domestic oil production from these unconventional sources. The United States is now estimated to have over 24 billion barrels of recoverable oil in shale recoverable using these techniques. The best evidence of the transformative potential of America’s domestic energy production use of disruptive technology is the amazing growth of oil production in North Dakota and the Bakken Shale.

Unconventional oil production in the US has grown to an expected 400,000 barrels/day in 2011 and 510,000 barrels/day in 2012. If you think this isn’t game changing consider that the growth in domestic energy production is now the functional equivalent of one of Saudi Arabia’s largest oil fields, Khursaniyah.

Remember, President Obama’s recent action to release 30 million barrels of oil from the US strategic petroleum reserve? That 30 million barrels represents just 75 days of average 2011 domestic oil production from emerging unconventional sources and by 2012 it would only take 58 days of domestic production to make up that 30 million barrels.

You see where this is going?

America’s domestic energy production is not only the way out of our economic slump but it is also the fastest, best and most secure way to protect America’s strategic economic and geopolitical interests for the future. That reality is finally dawning on our politicians.

US EIA commissioned a more detailed independent assessment of the technically recoverable shale gas and shale oil resources from these unconventional energy plays in the US by INTEK, Inc. The full report prepared by INTEK was released in July 2011 by US EIA and is being incorporated in the US DOE models that feed its Annual Energy Outlook. EIA says the INTEK assessment will provide a starting point for future work done to assess he changes in domestic energy productive capacity.

This INTEK report is important but conservative. Its estimate of technically recoverable oil and gas needs to be regularly benchmarked against other studies and the actual field results across the oil and gas plays where horizontal drilling and hydraulic fracturing are being put to the test.

The good news is that there is really good news in America’s domestic energy production. The good news is we are already seeing the results of those efforts in lower natural gas prices making possible the clean energy transformation with domestic natural gas as the transition fuel offsetting coal to achieve significant emissions reductions. Lower natural gas prices helps jump start America’s return to manufacturing, helps revive our strategic industrial base, creates good paying manufacturing and supply jobs across the economy, and puts tax revenue in the treasury of the Federal and State governments as the investment, income and spending ripple through the economy.

Bakken Unconventional Oil Production Trend

Even New York State finally woke up to the reality that bashing unconventional oil and natural gas production in the Marcellus and Utica shales was about to cost New York big time as production went to Pennsylvania, West Virginia, Ohio and other Northeastern states.

The markets have spoken.

America has a growing consensus on a new national energy policy. Drill, Baby, Drill has been transformed into Grow, Baby, Grow as the fruits of unconventional oil and gas come to market and the country realizes once again that America’s best days are ahead of it as we climb out of our economic hole the old fashioned way—–we’re earning it by our ingenuity, can-do spirit, hard word and determination without government subsidies, mandates or stimulus.